Legislation passed to increase NIS benefits and contributions

As the PNM honoured its manifesto pledge to increase NIS benefits, Government also brought legislation to increase the overall NIS contributions of taxpayers from 8.4 percent of insured earning to 9.9 percent over a three year period beginning from March 1, 2004. The legislation also confirmed the increases in NIS benefits, resulting in $1,000 for pensions; a higher child benefit — $320; a raise in maternity grant — from $1,000 to $2,000 and funeral grant — from $2,000 to $4,000. There would also be a 24 percent increase for persons who claim sickness, injury and disability benefits and medical expenses.

This was the package presented by Minister in the Ministry of Finance, Conrad Enill, in the House of Representatives yesterday as he piloted the National Insurance Amendment bill. Enill said the contribution rate would be an increase in total as follows : from 8.4 percent to 8.7 percent on March 2, 2004 and then to 9.3 percent on January 3, 2005. Enill said the legislative package also included an increase in the income insured by the NIB from the current ceiling of $3,510 per month to $4,377 per month from March 1, 2004. He said the improvement in the retirement pension represented an increase of approximately $30 million per month in added income in the hands of the pensioners.

In the case of the adjustment of the child’s benefit, a total of 5,283 child payments had been upgraded at an additional cost of $1.2 million per month, he said. For the employer the increases in contributions would result in a total increased contribution by employers of $42.89 million for the five months to June 2004; $109 million for the year ending June 2005 and $121.31 million for the year ending June 2006. But Enill pointed out that notwithstanding the increase in the contribution rate, the new contribution tables would have the effect of reducing the actual contribution to be paid by employees with the lowest incomes. Part-time domestic workers and jobs with an income of between $100 and $160 per week, will receive a total reduction in weekly contributions of $1.68 or 12 percent from March 2, 2004.

Enill said the contribution rates in Trinidad and Tobago, even with the increase, would be less than other jurisdictions. Trinidad and Tobago’s overall rate of 8.4 percent, compares favourably with Grenada nine percent; Anguilla ten percent; Barbados 15.25 percent; Bolivia 10 percent; Mexico 15.26 percent; UK 23.8 percent; Austria 22.8 percent; Germany 19.10 percent; Japan 17.2 percent and Singapore 36 percent. Enill said that the legislation before the Parliament also sought to eliminate gender discrimination by equalising the qualifying conditions form the widow’s and widower’s benefits. Furthermore, all persons eligible for widow’s or widower’s benefit from March 1, 2004, would be paid a pension for life until remarriage, regardless of age, medical condition or existence of dependent children. Arguing that the NIB, which started in 1972,  provided “social insurance” and was working well, Enill cited several examples. He said a labourer who retired in 1977, after five years of contributions and whose NIS contributions together with that of his employer amounted to a total $941.19, received $48,119.78 in retirement benefit payment in the lowest class up to his death in February 2002. His survivors received $2,600 for the period March 2002 to February 2003 and are still receiving payment. Analysis, therefore, showed that the employee’s principal was repaid in four months and his and his employers in 11 months, the Minister said.

Enill said in the case of a manager/professional, his contributions from employee and employers paid at the highest rate from 1972 until retirement in August 2003, amounted to $37,139.04. The retiree received $1,191.46 in retirement pension up to September 2003 and if $1,000 is to be paid monthly for the next 16 years, “which is the estimated life expectancy,” the total sum paid to the client would be approximately $190,000, Enill said. The retiree’s principal would be repaid in 1.03 years and the toal amount paid by both the employer and employee, repaid in 3.1 years, he said, adding that the annualised lifetime yield on total contribution would be 8.29 per- cent. “None of the existing mutual funds can boast of or promise such yields over similar periods,” the Minister said. Enill said the legislation would also allow for a series of tables that would effectively revalue past contributions in order to compensate for inflation “so as to ensure that, upon retirement, the benefits purchased will not only be meaningful but will also give superior value for money.” The Minister stated that while the Board had proposed to retain the retirement age at 60 years, it noted that the trend in both developed and developing countries was to move the retirement age to 65 or beyond.